A Bearish Engulfing candle is a bearish two-period reversal pattern. It can often be a very powerful reversal signal. The Bearish Engulfing can indicate exhaustion in buying pressure after a phase of positive price action. It is a candle that signals the beginning of a new trend of lower prices. 

The candle is most effective when it is seen at the end of an uptrend.

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How to identify the Bearish Engulfing pattern

The Bearish Engulfing candle starts with the OPEN price above the previous CLOSE (this would be a gap higher). The price might then move briefly higher before a bull failure. 

The OPEN is at (or around) the session HIGH, with the HIGH ideally also the highest price of the uptrend. This rejection of the new high then results in the price falling throughout the session. 

The candle finishes with the CLOSE price of the below the OPEN of the previous candle. The whole of the previous session’s candlestick body is said to have been ”engulfed”. 

Note: Although the Bearish Engulfing is just one candlestick, it is measured off the previous candle. Strictly speaking, it is a two-period candlestick set-up.

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Using Bearish Engulfing signals

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This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. INFINOX is not authorised to provide investment advice. No opinion given in the material constitutes a recommendation by INFINOX or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. All trading carries risk.